financial statements€¦ · june 30, 2015 this discussion and analysis of the henryetta hospital...
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Henryetta Hospital Authority Henryetta, Oklahoma
Financial Statements
June 30, 2015 and 2014
(With Independent Auditors’ Report Thereon)
HENRYETTA HOSPITAL AUTHORITY
HENRYETTA, OKLAHOMA
FINANCIAL STATEMENTS
Table of Contents
Page
Independent Auditors’ Report ................................................................................................................1
Management’s Discussion and Analysis ............................................................................................. I–1
Financial Statements:
Statements of Net Position ............................................................................................................4
Statements of Revenues, Expenses, and Changes in Net Position ...............................................5
Statements of Cash Flows .............................................................................................................6
Notes to Financial Statements .......................................................................................................7
Independent Auditors’ Report on Internal Control
Over Financial Reporting and on Compliance
and Other Matters Based on an Audit of
Financial Statements Performed in
Accordance with Government Auditing Standards............................................................................14
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1421 East 45th Street • Shawnee, OK 74804
P: 405.878.7300 • www.finley-cook.com • F: 405.395.3300
INDEPENDENT AUDITORS’ REPORT
Board of Trustees
Henryetta Hospital Authority
Henryetta, Oklahoma
Report on the Financial Statements
We have audited the accompanying financial statements of the business-type activities of the Henryetta
Hospital Authority (the “Authority”), a component unit of the City of Henryetta, Oklahoma, as of and
for the years ended June 30, 2015 and 2014, and the related notes to the financial statements, which
comprise the Authority’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States and
the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
(Continued)
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INDEPENDENT AUDITORS’ REPORT, CONTINUED
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the business-type activities of the Authority as of June 30, 2015 and 2014, and the
changes in financial position and cash flows for the years then ended in accordance with accounting
principles generally accepted in the United States.
Emphasis of Matter
Authority-Only Financial Statements
As discussed in Note 1, the financial statements of the Authority are intended to present the financial
position, the changes in financial position, and cash flows of only that portion of the City of Henryetta,
Oklahoma, that is attributable to the transactions of the Authority. They do not purport to, and do not
present fairly the financial position of the City of Henryetta, Oklahoma, as of June 30, 2015 and 2014,
the changes in its financial position, or, where applicable, its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States. Our opinion is not
modified with respect to this matter.
Other Matter
Required Supplementary Information
Accounting principles generally accepted in the United States require that the management’s discussion
and analysis on pages I-1 and I-2 be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board, who considers it to be an essential part of financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance with
auditing standards generally accepted in the United States, which consisted of inquiries of management
about the methods of preparing the information and comparing the information for consistency with
management’s responses to our inquiries, the basic financial statements, and other knowledge we
obtained during our audit of the basic financial statements. We do not express an opinion or provide any
assurance on the information because the limited procedures do not provide us with sufficient evidence
to express an opinion or provide any assurance.
(Continued)
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INDEPENDENT AUDITORS’ REPORT, CONTINUED
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
February 2, 2016, on our consideration of the Authority’s internal control over financial reporting and
on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to provide
an opinion on internal control over financial reporting or on compliance. That report is an integral part
of an audit performed in accordance with Government Auditing Standards in considering the Authority’s
internal control over financial reporting and compliance.
Shawnee, Oklahoma
February 2, 2016
I–1
HENRYETTA HOSPITAL AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2015
This discussion and analysis of the Henryetta Hospital Authority (the “Authority”) financial statements
provides an overview of the Authority’s financial activities for the year ended June 30, 2015.
Financial Highlights
The Authority’s financial position as a whole increased during the fiscal year ended June 30, 2015.
Total assets increased $139,841, or 1.98%, over the previous year. Net position increased $79,479 or
1.13% over the previous year.
Overview of the Financial Statements
The enclosed statements are presented on an enterprise fund basis and include all assets and liabilities
using the accrual basis of accounting, which is consistent with the accounting used by private sector
entities. All of the current year’s revenues and expenses are recognized when earned or incurred,
regardless of when cash is received or paid.
Financial Analysis
Net position is one way to measure the Authority’s financial position. Over time, increases or
decreases in the Authority’s net position are an indicator of whether its financial position is improving
or declining.
For the year ended June 30, 2015, total assets were $7,186,400 and total liabilities were $60,362.
Operating revenues of $312,490 exceeded operating expenses of $249,886, resulting in operating
income of $62,604.
Operating Revenues
Operating revenues remained unchanged for the fiscal year ended June 30, 2015.
Operating Expenses
Operating expenses decreased $62,072 during the fiscal year ended June 30, 2015.
I–2
HENRYETTA HOSPITAL AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS, CONTINUED
Financial Analysis, Continued
Non-Operating Revenues/Expenses
Significant changes in non-operating revenues/expenses were the result of the following:
Changes in the long-term receivable for the year ended June 30, 2015, resulted in a
decrease of $3,495 due to a decrease in the Consumer Price Index used to adjust the
receivable annually.
Interest income on investments increased $1,615 for the year ended June 30, 2015.
Statement of Cash Flows
The primary purpose of the statement of cash flows is to provide information about the cash
receipts and disbursements of an entity over a period of time. This statement also aids in the
assessment of an entity’s ability to generate future net cash flows, its ability to meet obligations
as they come due, and needs for external financing.
Capital Assets
At June 30, 2015, the Authority had $12,827,088 invested in capital assets. The related accumulated
depreciation was $10,595,759. Depreciation charges for the year totaled $195,526, compared to
$213,013 in the previous year.
For additional information related to capital assets, please see Note 4 to the financial statements.
Debt
At June 30, 2015, the Authority had no outstanding debt.
Contacting the Authority’s Financial Management
This financial report is designed to provide our patients, suppliers, and creditors with a general overview
of the Authority’s finances and to show the Authority’s accountability for the money it receives.
Questions about this report and requests for additional financial information should be directed to the
Authority’s administration by calling (918) 650-1301.
See Independent Auditors’ Report.
See accompanying notes to financial statements.
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HENRYETTA, OKLAHOMA
June 30, 2015 2014
Assets
Current assets:
Cash 244,748$ 596,997
Investments 3,031,623 3,011,587
Interest receivable 2,302 2,212
Total current assets 3,278,673 3,610,796
Noncurrent assets:
Capital assets:
Property, buildings, and equipment 12,827,088 12,746,449
Construction in progress 590,346 -
Less accumulated depreciation (10,595,759) (10,400,233)
Capital assets, net 2,821,675 2,346,216
Long-term receivable 1,086,052 1,089,547
Total noncurrent assets 3,907,727 3,435,763
Total assets 7,186,400$ 7,046,559
Liabilities and Net Position
Liabilities 60,362$ -
Net position:
Investment in capital assets, net 2,821,675 2,346,216
Unrestricted 4,304,363 4,700,343
Total net position 7,126,038 7,046,559
Total liabilities and net position 7,186,400$ 7,046,559
HENRYETTA HOSPITAL AUTHORITY
STATEMENTS OF NET POSITION
See Independent Auditors’ Report.
See accompanying notes to financial statements.
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HENRYETTA, OKLAHOMA
Years Ended June 30, 2015 2014
Revenues:
Rental income 312,490$ 312,490
Total revenues 312,490 312,490
Expenses:
Supplies, utilities, and purchased services 32,429 30,979
Insurance 8,007 7,786
Depreciation 195,526 213,013
Repairs and maintenance 2,389 23,682
Legal and professional 11,535 36,498
Total expenses 249,886 311,958
Net income from operations 62,604 532
Non-operating revenues and expenses:
Interest income 20,370 18,755
(Decrease) increase in long-term receivable (3,495) 12,946
Gain from sale of capital assets - 2,354
Total non-operating revenues 16,875 34,055
Changes in net position 79,479 34,587
Net position, beginning of year 7,046,559 7,011,972
Net position, end of year 7,126,038$ 7,046,559
HENRYETTA HOSPITAL AUTHORITY
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
See Independent Auditors’ Report.
See accompanying notes to financial statements.
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HENRYETTA, OKLAHOMA
Increase (Decrease) in Cash and Cash Equivalents
Years Ended June 30, 2015 2014
Cash flows from operating activities:
Revenues 312,490$ 312,490
Payments to vendors (54,360) (98,945)
Net cash provided by operating activities 258,130 213,545
Cash flows from investing activities:
Purchase of certificate of deposits (20,036) (18,505)
Interest income from investments 20,280 18,754
Net cash provided by investing activities 244 249
Cash flows from noncapital financing activities - -
Cash flows from capital and related financing activities:
Purchase of capital assets (610,623) (8,362)
Miscellaneous receipts—gain from sale of fully depreciated assets - 2,354
Net cash used in capital and related financing activities (610,623) (6,008)
Net (decrease) increase in cash and cash equivalents (352,249) 207,786
Cash and cash equivalents, beginning of year 596,997 389,211
Cash and cash equivalents, end of year 244,748$ 596,997
Reconciliation of net income from operations to
net cash provided by operating activities:
Net income from operations 62,604$ 532
Adjustments to reconcile net income from
operations to net cash provided by operating activities:
Depreciation 195,526 213,013
Net cash provided by operating activities 258,130$ 213,545
HENRYETTA HOSPITAL AUTHORITY
STATEMENTS OF CASH FLOWS
HENRYETTA HOSPITAL AUTHORITY
HENRYETTA, OKLAHOMA
NOTES TO FINANCIAL STATEMENTS
June 30, 2015 and 2014
See Independent Auditors’ Report.
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(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ownership
The Henryetta Medical Center (the “Hospital”) is owned and operated by the Henryetta Hospital
Authority (the “Authority”), which was established on April 18, 1977, pursuant to Title 60,
Oklahoma Statutes 1971, Section 176 to 180.4 inclusive, as amended. The Authority is a
component unit of the City of Henryetta, Oklahoma. The City of Henryetta, Oklahoma, is the
beneficiary of the Authority.
On November 1, 2004, the Board of Trustees of the Authority entered into an agreement with
AHS Henryetta Hospital, LLC; Hillcrest Healthcare Systems; and Ardent Health Services, Inc.
Under the terms of this agreement the Authority and Hillcrest Healthcare Systems agreed to
terminate their “Master Agreement” dated September 15, 1997. Further, certain assets
purchased by the Hospital were transferred to the Authority in return for a reduction in the
amount due from Hillcrest Healthcare Systems. On November 1, 2004, an “Amended and
Restated Operating Agreement” was entered into by the Authority with AHS
Henryetta Hospital, LLC and Ardent Health Services, Inc. (collectively “Ardent”). The
November 1, 2004, “Amended and Restated Operating Agreement” between the Authority and
Ardent was amended on September 30, 2007. The “Second Amended and Restated
Operating Agreement” (the “Agreement”) commenced on October 1, 2007, and was to expire
September 30, 2014. On June 23, 2014, Ardent exercised a 5-year renewal of the Agreement.
The Agreement was extended until September 30, 2019. The Agreement allows Ardent to
operate the Hospital and to use the Hospital’s name in its operations. Under the terms of the
Agreement, equipment and operating assets of the Authority were transferred to Ardent during
the duration of the Agreement.
The financial statements include only the activities of the Authority and are intended to present
the financial position and the changes in financial position of only that portion of the business-
type activities of the City of Henryetta, Oklahoma, that is attributable to the transactions of the
Authority.
Basis of Accounting and Presentation
The accounting and reporting policies of the Authority conform to accounting principles
generally accepted in the United States for units of local government as promulgated by the
Governmental Accounting Standards Board (GASB).
The Authority prepares its financial statements on the accrual basis of accounting. Under this
method of accounting, revenue is recognized when earned or billed, and expenses are
recognized when goods or services are received, whether paid or not.
HENRYETTA HOSPITAL AUTHORITY
HENRYETTA, OKLAHOMA
NOTES TO FINANCIAL STATEMENTS, CONTINUED
See Independent Auditors’ Report.
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(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Financial Statement Presentation
The Authority’s financial statements are prepared in accordance with accounting principles
generally accepted in the United States. GASB is responsible for establishing the accounting
principles generally accepted in the United States for state and local governments through its
pronouncements (Statements and Interpretations).
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
Measurement Focus
The accounting and financial reporting treatment applied to a fund is determined by its
measurement focus. The statements of net position and the statements of revenues, expenses,
and changes in net position are presented using the economic resources measurement focus. The
accounting objectives of this measurement focus are the determination of net income, financial
position, and cash flows. All assets and liabilities associated with their activities are reported.
Recent Accounting Pronouncements
In June 2012, GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions
(GASB 68). The primary objective of GASB 68 is to improve accounting and financial reporting
for pensions by state and local governments, and to improve information where support for
pensions has been provided by other entities. GASB 68 establishes standards for measuring and
recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and
expenses/expenditures. The Authority adopted this statement effective July 1, 2014. The
adoption had no significant impact on the financial statements of the Authority.
In January 2013, GASB issued Statement No. 69, Government Combinations and Disposals of
Government Operations (GASB 69). GASB 69 establishes accounting and financial reporting
standards related to governmental combinations and disposals of government operations.
Generally, governmental combinations include mergers, acquisitions and transfers of operations.
This statement improves financial reporting by providing guidance for business combinations in
the governmental environment. The Authority adopted this statement July 1, 2014. Presently
the Authority has no items to be reported, and the adoption had no significant impact on the
financial statements of the Authority.
HENRYETTA HOSPITAL AUTHORITY
HENRYETTA, OKLAHOMA
NOTES TO FINANCIAL STATEMENTS, CONTINUED
See Independent Auditors’ Report.
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(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Recent Accounting Pronouncements, Continued
In November 2013, GASB issued Statement No. 71, Pension Transition for Contributions Made
Subsequent to the Measurement Date (GASB 71). GASB 71 amends GASB 68 by amending the
transition provisions of GASB 68. At transition to GASB 68, employers that could not
practically determine all of the deferred inflows and outflows related to pensions were provided
guidance that no deferred inflows or outflows should be reported. GASB 71 amends this
guidance to provide that a government recognize a beginning deferred outflow of resources for
pension contributions made subsequent to the measurement date. GASB 71 will eliminate the
source of a potential significant understatement of restated beginning net position and expense in
the first year of implementation of GASB 68. The Authority adopted this statement on
July 1, 2014. The adoption had no significant impact on the Authority’s financial statements.
In February 2015, GASB issued Statement No, 72, Fair Value Measurement and Application
(GASB 72). GASB 72 addresses accounting and financial reporting issues related to fair value
measurements. The definition of fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the
measurement date. GASB 72 provides guidance for determining a fair value measurement for
financial reporting purposes. GASB 72 also provides guidance for applying fair value to certain
investments and disclosures related to all fair value measurements. The requirements of
GASB 72 will enhance comparability of financial statements among governments by requiring
measurement of certain assets and liabilities at fair value using a consistent and more detailed
definition of fair value and accepted valuation techniques. GASB 72 also will enhance fair value
application guidance and related disclosures in order to provide information to financial
statement users about the impact of fair value measurements on a government’s financial
position. GASB 72 is effective for financial statements for periods beginning after
June 15, 2015. The Authority will adopt GASB 72 effective July 1, 2015, for the June 30, 2016,
reporting year. GASB 72 will require additional and/or revised disclosures in the financial
statements.
Capital Assets
Capital assets which have an expected useful life of more than 1 year are recorded at cost when
purchased. Depreciation expense is calculated on a straight-line basis over a 3- to 30-year
period.
HENRYETTA HOSPITAL AUTHORITY
HENRYETTA, OKLAHOMA
NOTES TO FINANCIAL STATEMENTS, CONTINUED
See Independent Auditors’ Report.
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(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Long-Term Receivable
The long-term receivable represents assets which were transferred to Ardent for their use in
operating the Hospital. The Authority is entitled to receive working capital, as defined in the
Agreement, equal to $1,014,611, adjusted for changes in the Consumer Price Index (CPI). The
balance of the receivable was $1,086,052 and $1,089,547 as of June 30, 2015 and 2014,
respectively. An allowance for doubtful accounts was not considered necessary as of
June 30, 2015 or 2014.
Risk Management
The Authority is exposed to various risks of loss from torts; theft of, damage to, and destruction
of assets; business interruption; errors and omissions; employee injuries and illnesses; natural
disasters; and employee health, dental, and accident benefits. Commercial insurance coverage is
purchased for claims arising from such matters except certain natural disasters.
Related-Party Transactions
The Authority has an agreement with the Hospital’s Administrative Executive Assistant to
provide janitorial services to the Authority. Payments for such services approximated $10,800
for the year ended June 30, 2015.
Date of Management’s Review of Subsequent Events
Management has evaluated subsequent events through February 2, 2016, the date which the
financial statements were available to be issued.
(2) CASH
The Authority’s cash is in an interest-bearing deposit account at a local financial institution and
is insured by the FDIC and collateralized with a letter of credit. As of June 30, 2015 and 2014,
the Authority had no cash which was not insured or collateralized.
HENRYETTA HOSPITAL AUTHORITY
HENRYETTA, OKLAHOMA
NOTES TO FINANCIAL STATEMENTS, CONTINUED
See Independent Auditors’ Report.
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(3) INVESTMENTS
The Authority’s informal investment policy is to invest only in certificates of deposit. As of
June 30, 2015 and 2014, the certificates of deposit earned interest at rates ranging from 0.55%
to 0.75%. All of the certificates of deposit are insured by the FDIC, collateralized with a letter
of credit, or collateralized with securities held by the pledging bank’s safekeeping agent, but
not in the Authority’s name. The certificates of deposit have maturities of 12 months or less.
(4) CAPITAL ASSETS
The capital assets of the Authority consist of land, land improvements, buildings, and equipment.
A summary of changes in capital assets is as follows:
Balance at
June 30, 2014 Additions Disposals
Balance at
June 30, 2015
Land 75,385$ - - 75,385
Land improvements 581,750 - - 581,750
Buildings 6,970,814 - - 6,970,814
Equipment 5,118,500 80,639 - 5,199,139
Construction in progress - 590,346 - 590,346
12,746,449 670,985 - 13,417,434 Less accumulated
depreciation (10,400,233) (195,526) - (10,595,759)
Capital assets, net 2,346,216$ 475,459 - 2,821,675
Balance at
June 30, 2013 Additions Disposals
Balance at
June 30, 2014
Land 75,385$ - - 75,385
Land improvements 581,750 - - 581,750
Buildings 6,966,114 4,700 - 6,970,814 Equipment 5,119,546 1,308 (2,354) 5,118,500
12,742,795 6,008 (2,354) 12,746,449 Less accumulated
depreciation (10,191,928) (210,659) 2,354 (10,400,233)
Capital assets, net 2,550,867$ (204,651) - 2,346,216
HENRYETTA HOSPITAL AUTHORITY
HENRYETTA, OKLAHOMA
NOTES TO FINANCIAL STATEMENTS, CONTINUED
See Independent Auditors’ Report.
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(5) LONG-TERM RECEIVABLE
As previously discussed in Note 1, the Authority transferred assets to Ardent to be used in the
operation of the Hospital. As a result of the transfer, the Authority has a contractual right to
receive “Financial Working Capital,” as defined, of $1,014,611 (adjusted by the CPI, as defined)
at the expiration of the Agreement. The Authority has recorded the amount to be received and
adjusted the amount by the CPI at June 30, 2015 and 2014, using the formula defined in the
Agreement. The receivable balance and adjustments recorded are as follows:
2015 2014
Long-term receivable balance
at beginning of year 1,089,547$ 1,076,601
Changes due to the CPI (3,495) 12,946
Long-term receivable balance
at end of year 1,086,052$ 1,089,547
(6) OPERATING LEASE REVENUES
The Authority has entered into various operating lease agreements for the rental of its properties.
There are two primary lease rental agreements: one with Ardent, which provides $125,000
annually through September 30, 2019, for the lease of the Hospital; and one with Fresenius for
the Dialysis Center, which provides rental income of $91,000 annually through March 31, 2020.
The rental income from the Fresenius lease increased 10% annually after year six. We noted one
lease that expired March 31, 2015, however, the Authority is still receiving payments and
expects a lease renewal to be signed in the near future. The future minimum lease payments to
be received as of June 30, 2015, are as follows:
2016 255,680$
2017 237,844
2018 228,286
2019 225,100
2020 106,325
1,053,235$
HENRYETTA HOSPITAL AUTHORITY
HENRYETTA, OKLAHOMA
NOTES TO FINANCIAL STATEMENTS, CONTINUED
See Independent Auditors’ Report.
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(7) CONCENTRATIONS
As previously discussed in Note 1, the Authority and Ardent entered into an agreement that
transferred assets of the Authority to Ardent and allowed Ardent to assume operations of the
Hospital. In return, Ardent pays a fee to the Authority of $125,000 per year for property rental,
as discussed in Note 6. The fee represents a significant portion of Authority’s revenues. For the
years ended June 30, 2015 and 2014, the fees received from Ardent represented 40% of the
Authority’s rental income.
In addition, as previously discussed in Note 6, the lease agreement with Fresenius provided
$100,000 of rental revenues for the years ended June 30, 2015 and 2014. This represents 32% of
the Authority’s rental income for the years ended June 30, 2015 and 2014.
(8) COMMITMENTS
The Authority had an outstanding construction contract commitment of approximately $235,000
as of June 30, 2015.
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1421 East 45th Street • Shawnee, OK 74804
P: 405.878.7300 • www.finley-cook.com • F: 405.395.3300
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE
AND OTHER MATTERS BASED ON AN AUDIT OF
FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Board of Trustees
Henryetta Hospital Authority
Henryetta, Oklahoma
We have audited, in accordance with the auditing standards generally accepted in the United States and
the standards applicable to financial audits contained in Government Auditing Standards issued by the
Comptroller General of the United States the financial statements of the business-type activities of the
Henryetta Hospital Authority (the “Authority”), a component unit of the City of Henryetta, Oklahoma,
as of and for the year ended June 30, 2015, and the related notes to the financial statements, which
comprise the Authority’s basic financial statements, and have issued our report thereon dated
February 2, 2016. Our report includes an explanatory paragraph disclaiming an opinion on
management’s discussion and analysis. Our report also includes an explanatory paragraph to emphasize
the fact that the financial statements include only that portion of the City of Henryetta that is attributable
to transactions of the Authority.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Authority’s internal
control over financial reporting (“internal control”) to determine the audit procedures that are
appropriate in the circumstances for the purpose of expressing our opinion on the financial statements,
but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control.
Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that a material
misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a
timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal
control that is less severe than a material weakness, yet important enough to merit attention by those
charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
(Continued)
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INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE
AND OTHER MATTERS BASED ON AN AUDIT OF
FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS, CONTINUED
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority’s financial statements are free
from material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and material
effect on the determination of financial statement amounts. However, providing an opinion on
compliance with those provisions was not an objective of our audit, and accordingly, we do not express
such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
entity’s internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the Authority’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
Shawnee, Oklahoma
February 2, 2016